Heteronomics Archive

August 12, 2025

RBA Cuts as Productivity Concerns Grow

The RBA cut rates by 25bp to 3.60%, as expected, in the third reduction of 2025, with unanimous board support following July's surprise 6-3 hold pending inflation data.
The central bank downgraded its productivity growth assumption to 0.7% from 1.0%, lowering medium-term GDP forecasts and signalling structural economic challenges ahead.
The Governor signals that a "couple more" cuts are likely, with the cash rate path expected around 3.0% by 2026, while maintaining a data-dependent approach to future policy decisions.

July 08, 2025

The RBA surprised markets by maintaining the cash rate at 3.85%, rejecting consensus expectations for a cut and citing the need for further confirmation that inflation is sustainably on track to the 2.5% midpoint.
The decision reflects persistent uncertainty in the global economic environment and a domestic outlook characterised by robust labour market conditions but only gradual recovery in household demand, with risks on both sides of the inflation outlook.
The Board’s split vote and explicit data-dependent stance signal that future interest rate decisions will be highly sensitive to forthcoming inflation and labour market data, as well as evolving international developments.

May 20, 2025

The RBA cut the cash rate by 25bps to 3.85%, in line with expectations, as trimmed mean inflation fell below 3% and is likely to remain near the midpoint of the 2–3% target range.
Despite easing financial conditions and recovering household incomes, consumption momentum remains weak, while high unit labour costs, driven by subdued productivity, present lingering inflation risks.
Global trade uncertainty and geopolitical tensions weigh heavily on the outlook, reinforcing the RBA’s cautious approach and commitment to respond decisively if downside risks to growth or inflation emerge.

April 01, 2025

The RBA held the cash rate at 4.10%, in line with expectations, citing ongoing but uncertain progress in reducing underlying inflation towards the 2–3% target range.
Labour market conditions remain tight despite a February employment decline, with low underutilisation and elevated unit labour costs continuing to present inflationary risks.
Global uncertainties, including new US tariffs and geopolitical tensions, could dampen global activity and further complicate the inflation outlook, reinforcing the RBA’s cautious and data-dependent stance.